$CLF calls rack up quick profits

It took less than a week for option traders to double their money in Cleveland-Cliffs.

On Sept. 20, Investitute’s tracking systems detected the purchase of 6,000 October $13 calls for $0.35 as part of a bullish roll with shares at $12.07. This was clearly a new position, as volume was well above the strike’s open interest of 4,279 contracts. Investitute co-founder Jon Najarian cited the unusual activity at that time on CNBC’s “Halftime Report.”

Those calls sold for $0.70 this afternoon, twice their purchase price. The stock rose 7.29% in the same time frame, illustrating the kind of leverage that can be achieved with options. It was the second winning trade in the name posted on Investitute in the last five sessions.

Long calls lock in the price where investors can buy a stock, letting them position for a rally at limited cost with the potential for significant leverage. They carry less risk than owning shares because the most that can be lost is the price of the options no matter how far the stock might fall.

CLF popped 4.11% today to close at $12.91. The iron-ore producer, which has been rallying with other commodities as the dollar has weakened, is scheduled to report earnings on Oct. 19 before the market opens.

(Disclosure: I am long CLF.)